1.

Which statement is incorrect regarding intangible

assets?
a. Intangible assets are identifiable non-monetary
assets without physical substance.
b. The recognition of an item of as an intangible asset
requires an entity to demonstrate that the item
meets the definition of an intangible asset and the
criteria for recognition.
c. An intangible asset shall be measured initially and
subsequently at cost.
d. Intangible assets are presented as a separate line
item in the statement of financial position.

2. The critical attributes of an intangible asset include

identifiability, control over the resource and existence
of future economic benefits. Which statement
describes existence of future economic benefits?
a. The asset is separable or arising from contractual
or other legal rights.
b. The entity has the power to obtain benefits from
the asset.
c. The use of the asset will generate revenues or
reduce future costs.
d. All of these.

3. Which of the following will most likely qualify for

recognition as intangible asset?
a. A team of skilled staff
b. Talented manager
c. Customer loyalty
d. Knowledge protected by legal rights

4. An intangible asset shall be recognized if, and only if:

a. It is probable that the expected future economic
benefits that are attributable to the asset will flow
to the entity.
b. The cost of the asset can be measured reliably.
c. Both a and b.
d. Neither a nor b.

5. Expenditures that do not satisfy the recognition criteria

are recognized as
a. In general, expenses when they are incurred.
b. In business combinations, part of the amount
attributed to the goodwill recognized at the
acquisition date.
c. Either a or b
d. Neither a nor b
6. Expenditure on items that cannot be distinguished
from the cost of developing the business as whole is
not recognized as intangible asset. Those items
include:
I. Brands
II. Mastheads
III. Publishing titles
IV. Customer lists
a. I, II and IV only c. II, III and IV only
b. II, and IV only d. I, II, III and IV

7. The probability recognition criterion is always

considered to be satisfied for intangible assets
a. Acquired separately
b. Acquired in a business combination
c. Generated internally
d. Both a and b

8. An intangible asset arising from development shall be

recognized if, and only if, an entity can demonstrate:
I. The technical feasibility of completing the
intangible asset so that it will be available for use
or sale.
II. Its intention to complete the intangible asset and
use or sell it.
III. Its ability to use or sell the intangible asset.
IV. How the intangible asset will generate probable
future economic benefits.
V. The availability of adequate technical, financial
and other resources to complete the development
and to use or sell the intangible asset.
VI. Its ability to measure reliably the expenditure
attributable to the intangible asset during its
development.
a. I, II, III, IV, V and VI.
b. I, II, IV and VI only.
c. I, II, III, IV and V only.
d. I, IV and VI only.

9. Research is original and planned investigation

undertaken with the prospect of gaining new scientific
or technical knowledge and understanding. Examples
of research activities do not include
a. Activities aimed at obtaining new knowledge.
b. The search for, evaluation and final selection of,
applications of research findings or other
knowledge.
c. The search for alternatives for materials, devices,
products, processes, systems or services.
d. The design, construction and testing of a chosen
alternative for new or improved materials, devices,
products, processes, systems or services.

10. Development is the application of research findings or

other knowledge to a plan or design for the production
of new or substantially improved materials, devices,
products, processes, systems or services before the
start of commercial production or use. Examples of
development activities do not include
a. The design, construction and testing of preproduction
or pre-use prototypes and models.
b. The design of tools, jigs, moulds and dies involving
new technology.
c. The design, construction and operation of a pilot
plant that is not of a scale economically feasible for
commercial production.
d. The formulation, design, evaluation and final
selection of possible alternatives for new or
improved materials, devices, products, processes,
systems or services.

11. Which statement is correct regarding research and

development expenditures?
a. Expenditure on research may be capitalized.
b. All development expenditures should be
capitalized.
c. If an entity cannot distinguish the research phase
of an internal project to create an intangible asset
from the development phase, the entity treats the
expenditure for that project as if it were incurred in
the development phase only.
d. Expenditure on an intangible item that was initially
recognized as an expense shall not be recognized
as part of the cost of an intangible asset at a later
date.

15. Which statement is incorrect regarding the cost of an

intangible asset?
a. If an intangible asset is acquired separately, the
cost comprises its purchase price, including import
duties and taxes and any directly attributable
expenditure of preparing the asset for its intended
use.
b. If an intangible asset is acquired in a business
combination that is an acquisition, the cost is
based on its fair value at the date of acquisition.
c. If an intangible asset is acquired free of charge or
by way of government grant, the cost is equal to
its fair value.
d. If payment for an intangible asset is deferred
beyond normal credit terms, its cost is equal to the
total payments over the credit period.

16. Directly attributable costs of preparing the asset for its

intended use do not include
a. Costs of employee benefits (as defined in PAS 19)
arising directly from bringing the asset to its
working condition.
b. Professional fees arising directly from bringing the
asset to its working condition.
c. Costs of testing whether the asset is functioning
properly.
d. Administration and other general overhead costs.

17. The cost of internally generated intangible asset

includes the following, except
a. Cost of materials and services used or consumed in
generating the intangible asset
b. Cost to register a legal right
c. Salaries, wages and other employment related
costs of personnel directly engaged in generating
the asset
d. Expenditure on training staff to operate the asset

18. Which of the following describes a patent?

a. It gives the holder exclusive right to use,
manufacture, and sell a product or a process
without interference or infringement by others.
b. A word, phrase, or symbol that distinguishes or
identifies a particular entity or product.
c. The exclusive and assignable legal right, given to
the originator for a fixed number of years, to print,
publish, perform, film, or record literary, artistic, or
musical material.
d. A contractual arrangement under which the
franchisor grants the franchisee the right to sell
certain products or services, to use certain
trademarks or trade names, or to perform certain
functions, usually within a designated geographical
area.

20. Which statement is correct regarding the amortization

of an intangible asset?
I. The cost less residual value of an intangible asset
with a finite useful life should be amortized over
that life
II. An intangible asset with an indefinite useful life
should not be amortized.
III. The maximum amortization period cannot exceed
twenty years.
a. I only c. I and III only
b. I and II only d. Neither I, II nor III

21. A consideration not relevant in determining the useful

life of the intangible asset is the
a. The period of control over the asset and legal or
similar limits on the use of the asset
b. Technical, technological, commercial or other types
of obsolescence
c. Expected actions of competitors or potential
competitors
d. Initial cost

22. The residual value of an intangible asset with a finite

useful life shall be assumed to be zero unless:
a. There is a commitment by a third party to
purchase the asset at the end of its useful life.
b. There is an active market for the asset and
residual value can be determined by reference to
that market and it is probable that such a market
will exist at the end of the asset’s useful life.
c. Either a or b.
d. Neither a nor b.

23. The method of amortization used for an intangible

asset with a finite life
a. Need not reflect the pattern of use of the asset
b. Should be based on revenue that is generated by
an activity that includes the use of the asset
c. Should always be the straight-line method
d. Should be the straight-line method if the pattern of
use cannot be determined reliably

24. Which statement is correct regarding subsequent

expenditures on intangible assets?
a. The nature of intangible assets is such that, in
many cases, there are additions to such an asset
or replacements of part of it.
b. Most subsequent expenditures are likely to
enhance the expected future economic benefits
embodied in an existing intangible asset that meet
the definition of an intangible asset and the
recognition criteria.
c. Expenditures incurred after the initial recognition
of an acquired intangible asset or after completion
of an internally generated intangible asset are
rarely recognized in the carrying amount of an
asset.
d. All of these.

27. The legal life of trademark is

a. Ten years
b. Twenty years
c. Seventeen years
d. The life of the creator plus fifty years

31. Which statement is incorrect regarding intangible

assets contained in or on a physical substance such as
a compact disc (in the case of computer software),
legal documentation (in the case of a license or patent)
or film?
a. In determining whether an asset that incorporates
both intangible and tangible elements should be
treated property, plant and equipment or as an
intangible asset, an entity uses judgment to assess
which element is more significant.
b. Computer software for a computer-controlled
machine tool that cannot operate without that
specific software is an integral part of the related
hardware and it is treated as property, plant and
equipment.
c. When the software is not an integral part of the
related hardware, computer software is treated as
an intangible asset.
d. The operating system of a computer is treated as
an intangible asset.

36. An asset representing the future economic benefits

arising from other assets acquired in a business
combination that are not individually identified and
separately recognized is
a. Goodwill c. Trademark
b. Patent d. Customer list

37. Goodwill may be recorded when:

a. It is identified within a company.
b. One company acquires another in a business
combination.
c. The fair value of a company’s assets exceeds their
cost.
d. A company has exceptional customer relations.

38. Internally generated goodwill is prohibited from

recognition in the financial statements of an entity.
The reason for this treatment is that:
a. Goodwill is not identifiable.
b. Goodwill is not measurable.
c. It is not comparable to any other intangible assets.
d. It is not prudent to recognize intangible assets.

44. Which of the following intangible assets should be

shown as a separate item on the statement of financial
position?
a. Goodwill c. Patent
b. Franchise d. Trademark

45. An entity shall disclose the following for each class of

intangible assets, distinguishing between internally
generated intangible assets and other intangible
assets:
I. Whether the useful lives are indefinite or finite
and, if finite, the useful lives or the amortization
rates used
II. The amortization methods used for intangible
assets with finite useful lives
III. The gross carrying amount and the accumulated
amortization (aggregated with accumulated
impairment losses) at the beginning and end of the
period
IV. The line item(s) of the statement of comprehensive
income in which any amortization of intangible
assets is included
V. A reconciliation of the carrying amount at the
beginning and end of the period
a. I, II, III IV and V c. I, II and III only
b. I, II, III and IV only d. II, III, IV and V only

46. An entity shall disclose

a. A description of any fully amortized intangible
asset that is still in use.
b. A brief description of significant intangible assets
controlled by the entity but not recognized as
assets because they did not meet the recognition
criteria in PAS 38.
c. The aggregate amount of research and
development expenditure recognized as an
expense during the period.
d. All of the above.

1. PAS 38 applies to
a. Intangible assets that are not within the scope of
another Standard.
b. Financial assets, as defined in PAS 32 Financial
Instruments: Presentation.
c. The recognition and measurement of exploration
and evaluation assets.
d. Expenditure on the development and extraction of
minerals, oil, natural gas and similar nonregenerative
resources.

2. PAS 38 applies to
a. Intangible assets held by an entity for sale in the
ordinary course of business.
b. Goodwill acquired in a business combination.
c. Non-current intangible assets classified as held for
sale.
d. Computer software used in extractive industries.

3. Which of the following items qualify as an intangible

asset under PAS 38?
a. Advertising and promotion on the launch of a huge
product
b. College tuition fees paid to employees who decide
to enroll in an executive M.B.A. program at
Harvard University while working with the
company
c. Operating losses during the initial stages of the
project
d. Legal costs paid to intellectual property lawyers to
register a patent

4. According to PAS 38 Intangible assets, which of the

following statements about research and development
expenditure is incorrect?
a. Research expenditure, other than capital
expenditure on research facilities, should be
recognized as an expense as incurred.
b. In deciding whether development expenditure
qualifies to be recognized as an asset, it is
necessary to consider whether there will be
adequate finance available to complete the project.
c. Development expenditure recognized as an asset
must be amortized over a period not exceeding 5
years.
d. Capitalized development expenditure must be
disclosed in the statement of financial position
under intangible non-current assets.

5. Which statement is incorrect concerning internally

generated intangible asset?
a. To assess whether an internally generated
intangible asset meets the criteria for recognition,
an enterprise classifies the generation of the asset
into a research phase and a development phase.
b. The cost of an internally generated asset
comprises all expenditure that can be directly
attributed or allocated on a reasonable and
consistent basis to creating, producing and
preparing the asset for its intended use.
c. Internally generated brands, mastheads,
publishing titles, customer lists and items similar in
substance should not be recognized as intangible
assets.
d. Internally generated goodwill may be recognized
as an intangible asset.

6. Which of the following costs would be capitalized?

a. Acquisition cost of equipment to be used on
current research project only.
b. Engineering costs incurred to advance the product
to the full production stage.
c. Cost of research to determine whether a market
for the product exists.
d. Salaries of research staff.

14. Which of the following disclosures does PAS 38 not

require?
a. A description, the carrying amount and remaining
amortization period of any individual intangible
asset that is material to the entity’s financial
statements.
b. The existence and carrying amounts of intangible
assets whose title is restricted and the carrying
amounts of intangible assets pledged as security
for liabilities.
c. Contractual commitments for the acquisition of
intangible assets.
d. Fair value of similar intangible assets used by its
competitors.